Gregory's Grocery (CR)

[hs-hop]

Hi,
I'm having problem with one of the CAT Exams questions, especially why C is correct but B isn't.

In 2000, Gregory's Grocery had a total of 50 stores in the United States and reported profits of $50 million in 2000. During the next five years, the chain added 20 stores per year for a total of 150 stores in the United States and Canada in 2005. Profits increased each year at a rate of 10 percent.

Which of the following can be concluded based on the passage above?

(A) The stores in Canada were not as profitable as those in the United States.
(B) Between 2000 and 2005, average revenue per store decreased.
(C) On average, the stores were less profitable in 2005 than in 2000.
(D) PRofit per store, or average profit, will continue to decrease if the chain continues to expand the number of stores.
(E) If Gregory’s Grocery shuts down some of its stores, average profitability will increase.

Explanation:
(B) The argument does not provide any information about average revenue per store or even about total revenue. This answer choice goes beyond the premises.
(C) Correct. A quick calculation shows that a 10 percent increase in annual profitability from $50 million in 2000 translates to profits of approximately $80 million in 2005, or average profits of approximately $.5 million per store. In 2000, average profits were $1 million per store ($50 million divided by 50 stores).

Thanks!

[StaceyKoprince]

On Draw a Conclusion questions, the right answer has to be something that is 100% true according to the passage - not just "probably" true or true most of the time. 100% - can't argue with it.

I'm guessing that you might possibly have overlooked a rather important difference in the argument vs. answer B. The argument gives figures for profits only - it never mentions revenues. Answer B mentions only revenues, not profits.

Profits depend upon both revenues and costs, so knowing something about how the profits changed does not tell us how revenues changed (unless we also know how costs changed too). Think of it as a math question - you've got three variables (P = R - C) and you only know something about one of them... so it's hard to figure out something about one of the others without any info about the third.

Answer C, on the other hand, does address profits, and we do know something about profits from the argument.

[hs-hop]

I understand now, thank you Stacey!

[dg_p]

i think ans should be E, because in other option you cannot conclude or relate the profit or revenue because of profit/revenue in terms of figure and percentage, only we can assume and conclude from the passage is some of the stores may be more profitable then others and to increase average profitability it has to close some of the less profit making store.

[JonathanSchneider]

E is going too far, though. For example, we don't know which stores might be shut down: what if they are the ones that are more profitable? We do not know that all stores have the same profitability, only that overall profitability per store has decreased.